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National Heritage Areas
Place-Based, Community Driven Conservation & Economic Development
Presented by the
National Heritage Area Program
National Partnership Office
National Park Service
in cooperation with
National Training Center
Bureau of Land Management
September 28, 2011
Liz Madison, Instructor
703-450-7870
Business Planning
for
Organization
Sustainability
TOOLKIT
Kenai Mountains – Turnagain Arm
National Heritage Area
Table of Contents
A Business Plan Answers 7 Questions 1
Six Phases of Business Plan Development 2
Process Checklist 3
How to Write a Business Plan and Elements of a Business Plan 5
Executive Summary and Organization Description 6
Products & Services 7
Market Analysis 8
Marketing Plan 9
Strategies and Implementation 10
Organization Structure and Financial Analysis 11
The Balance Sheet or Statement of Financial Position 12
Statement of Cash Flows 15
Income Statement or Profit and Loss Statement 16
Preparedness Assessment Quiz 18
A Business Plan Answers These Questions
1. What is or will be the purpose of your organization.
2. What needs does the organization intend to serve.
3. What services and/or products will the organization provide.
4. How the organization can service those needs better than your
competition.
5. How and where will the organization provide services or products.
6. What people are required and available to make the organization
work.
7. Why will the organization be able to attract funding and from whom.
Business Planning for Organization Sustainability Page 1
6 Phases of Business Plan Development
6 Phases ~ Think Butterfly
One • Concept
Two • Research & Development
Three • Production
Four • Beta Test
Five • Adopt
Six • Roll Out
Concept
R&D
A Time To Grow
Production
Beta Test
A Time To Change
Adopt
Roll Out
A Time To Fly
Business Planning for Organization Sustainability Page 2
PROCESS CHECKLIST Phase One: Concept
Review Strategic Plan to define the Business Plan focus
Discuss audience for the Business Plan
Discuss Business Plan expectations with organization’s leadership
Outline the scope and scale of the Business Plan
Select either a committee or individual approach
Discuss the need for external expertise
Establish a timeframe for development of the Business Plan
Phase Two: Research & Development
Draft the business plan based on known information
Review and analyze the organization’s financial information
Research the market for the organization’s services and or products
Research competitors
Review industry economic information
Review or analyze the organization’s marketing materials
Gather legal documents, i.e. IRS Letter of Determination, Trademarks, etc.
Select illustrations
Review organization chart, management team and or decision-making authority
list and bios
Phase Three: Production
Discuss R&D findings with the organization’s leadership
Revise draft plan with select R&D findings
Address strategies to seize opportunities
Address strategies to minimize threats
Add illustrations
Prepare the Executive Summary
Add appendices, i.e. contracts, letters of support, trademark verification, etc.
Business Planning for Organization Sustainability Page 3
Phase Four: Beta Test
Vet the draft plan with the organization’s leadership and staff
Review and discuss with a financial advisor
Review and discuss with legal counsel
Create an elevator pitch for the Business Plan
Review and discuss with current and potential investors and strategic partners
Incorporate comments into final draft document
Phase Five: Adopt
Adopt the Business Plan
Distribute to leadership of the organization
Discuss with staff and volunteers
Share with strategic business partners
Phase Six: Roll Out
Create a one-year action plan for each revenue line
Develop a one-year marketing action plan
Establish evaluation criteria for the action plans
Monitor progress
Apply adaptive management
Business Planning for Organization Sustainability Page 4
How to Write a Business Plan
Overview
Whether you are planning to start a new project or are looking for financing options, you should prepare a business plan for your organization. You can write the plan yourself, use software with basic templates, or hire a consultant.
You have to follow certain guidelines when you write a business plan. Topics covered should include your organization's goals, products, services, and client base. You should provide a description your organization, target market, and information regarding how you will reach customers. The business plan should be attention grabbing, precise, and positive.
A business plan should include a cover page that includes your organization's name, logo, address, phone number, website, and e-mail. A statement of purpose and table of contents should follow the cover page. The plan should then include an executive summary that explains a organization's rationale in addition to facts and figures. Other sections should include business descriptions, products/services, targeted market, marketing strategies, development, management, finances, plan, and indexes.
In the heading where you describe your organization, you can talk about what exactly your organization deals with, competitors, personnel, operating procedures, and insurance. In the finances section, you should attach balance sheets, cash flow analysis statements, profit and loss statements, accounting protocols and loan applications,
Business plans should include supplemental documents such as copies of license, lease deeds, and other legal documents.
Elements of A Business Plan
Executive Summary
Organization Description
Products and Services
Market Analysis
Marketing Plan
Strategies and Implementation
Organization Structure
Financial Analysis
Business Planning for Organization Sustainability Page 5
Executive Summary
Prepare last One to two pages
Introduce reader to key findings
Organization Description Key Points:
Who you are
What you do
Goals and objectives
Type of business
Detail to include as appropriate to your organization:
1. Vision
2. Mission
3. Where and when the organization was established
4. Core Values
5. Brief History – Timeline
6. Identify the type of organization in terms of the IRS, i.e. 501(c)3
7. Current status of the organization and stage of development
8. Describe the business opportunity and why your organization is in a position to lead
9. Demonstrate that the organization provides something novel/unique/special
10. Describe the present and future goals and objectives of the organization
11. Introduce the organization’s business and revenue models
12. Identify ownership of trademarks, patents, copyrights, URLs, licenses, contracts, etc.
13. Demonstrate a successful proof of concept through existing clients, beta tests
14. Identify the organization’s strengths and weaknesses
15. Identify the organization’s opportunities and threats
16. Formulate a clear, coherent strategy that will serve as the organization’s “game plan”
Business Planning for Organization Sustainability Page 6
Products and Services Key Points:
Describe products and
services
Identify target markets
Assess relative to competitors
Discuss expenses and
revenues
Highlight R&D
Address risk
Detail to include as appropriate to your organization:
1. Describe each product and service
2. Include unique features offered by each product or service
3. Include pictures and other visual aides
4. Describe the need for each
5. State how and why the product/service is a better alternative to competitors
6. Demonstrate evidence of the need for each product/service (surveys, existing customers, etc.)
7. Describe how these products and services are designed to meet customer needs
8. State the benefits to customers
9. Describe opportunities for expansion
10. Describe costs associated with products and services
11. Discuss pricing strategy for products and services
12. Provide a comparison to competitors
13. Indicate if these are market ready or in the development process
14. Describe R&D related to products and services
15. Discuss any legal or environmental requirements and how they will be addressed
16. Discuss guarantees, warrantees, insurance
17. Identify product life cycle
18. Address copyrights and intellectual, property
Business Planning for Organization Sustainability Page 7
Market Analysis Key Points:
Market Niche
Characteristics
Competition
Leadership
Customers
Detail to include as appropriate to your organization:
1. State the industry in which you operate
2. Discuss how the industry compares to GNP
3. Discuss the characteristics of the industry
4. Identify the largest and most important players
5. Identify the current status and prospects for the industry
6. Describe factors influencing growth or decline in the industry
7. Describe the role technology plays in the growth and future of the industry
8. Describe local, regional, national and international trends or events influencing the industry
9. Discuss the sensitivity to economic cycles and seasonality
10. Describe any cultural, social, political or legal issues that affect the industry
11. Identify market structures, key associations and governing bodies
12. Describe the organization’s niche in this industry
13. Describe level of competition in the market (low, medium, high)
14. Identify major competitors in the market by service and or product
15. Discuss whether the product/service is better than the competitor and why
16. Articulate the source of the organization’s competitive advantage
17. Describe primary and secondary target markets, including size and projected growth
18. Identify whether customers are local, regional, national or international
19. Identify the needs and wants of those customers
20. Describe the target customers in terms of demographics and psychographic criteria
21. Describe purchasing decisions in terms of planned or impulse
Business Planning for Organization Sustainability Page 8
Psychographic Criteria
In the field of marketing, demographics, opinion research, and social research in
general, psychographic variables are any attributes relating to personality,
values, attitudes, interests, or lifestyles.
They are also called IAO variables (for Interests, Activities, and Opinions).
They can be contrasted with demographic variables (such as age and gender),
behavioral variables (such as usage rate or loyalty), and firmographic variables
(such as industry, seniority and functional area).
Marketing Plan
Key Points:
How are you going to market
products and services
What is your marketing
message
Who are your marketing
partners
How will you evaluate your
marketing programs
How much will it cost
Detail to include as appropriate to your organization:
1. Identify specific marketing philosophies and strategies
2. Describe the “Key Success Variables” in the marketing plan
3. Identify specific marketing media that will be used to reach customers
4. Describe why these marketing media were chosen
5. Identify how much each marketing medium will cost
6. Identify how often each marketing medium will be used
7. Discuss sales, fundraising or investment strategy
8. Identify existing and or potential marketing partners and strategic alliances
9. Describe personnel needed to sell products/services and whether in-house or outsourced
10. Indicate whether specialized training will be needed
11. Describe how the customer will pay (e.g. cash, credit cards, etc. and when (e.g. payment terms)
12. Describe discounts
13. Describe evaluation criteria
14. Discuss key points of marketing message
Business Planning for Organization Sustainability Page 9
Strategies and Implementation Key Points:
Infrastructure Needs
Customer Relations
Action Plans:
Revenue, Products, Services,
Marketing
Timeline
Detail to include as appropriate to your organization:
1. State what the organization has accomplished and what needs to be done
2. Provide a graphical representation of implementation timeline
3. Describe any significant equipment needs and related acquisition costs or lease terms
4. Describe any licensing/regulatory requirements
5. Explain the organization’s philosophy towards customer service
6. Describe customer complaint and feedback processes
7. Outline technology needs and costs including:
Database development
Operating platforms
Software applications
Internet presents (i.e. website, social media, aps, QR codes)
8. Outline marketing implementation plan
9. Outline services implementation plan
10. Outline product implementation plan
11. Outline revenue generation/ fundraising implementation plan
Business Planning for Organization Sustainability Page 10
Organization Structure
Key Points:
Management Team
Management Team Gaps
Personnel Plan
Advisors and Consultants
Detail to include as appropriate to your organization:
1. Provide an organizational chart and describe structure
2. Describe key management roles and who fills each position
3. Discuss relevant experience, skills, track- record and education for management team
4. Identify positions that need to be filled and the skills/experience required for each position
5. Discuss the relationship between the leadership and sources of funding for the organization
6. Identify Board of Directors and/or advisors and relevant experience and contribution
7. List the firms the organization has retained to perform the following functions and provide contact information:
• Legal
• Accounting/Audit
• Insurance
• Technology
• Marketing
• Public Relations
• Consulting
Financial Analysis
Key Points:
Projected or Current Balance
Sheet
Projected or Current Profit and
Loss Statement
Projected or Current Cash Flow
Break-even Analysis
Business Ratios
Detail to include as appropriate to your organization:
1. Introduce the organization’s financial statements with a brief summary of key findings from analyzing financial records.
2. Balance Sheet or Statement of Financial Position
3. Income Statement or Profit and Loss Statement
4. Cash flow projection 5. Break-even analysis 6. Cost – benefit analysis 7. Nonprofit Business Ratios
Business Planning for Organization Sustainability Page 11
The following definitions and descriptions are from: Harold Averkamp (CPA) an accountant, consultant, and university accounting instructor for more than 25 years.
From the web site: www.accountingcoach.com/online-accounting-course
The Balance Sheet or Statement of Financial Position: Sample
Business Planning for Organization Sustainability Page 12
BALANCE SHEET or STATEMENT OF FINANCIAL POSITION The accounting balance sheet is one of the major financial statements used by accountants and businesses either for profit or nonprofit. The other major financial statements are the income statement and statement of cash flows. The balance sheet is also referred to as the statement of financial position. The balance sheet presents a nonprofit’s financial position at the end of a specified date. Some describe the balance sheet as a "snapshot" of the nonprofit’s financial position at a point (a moment or an instant) in time. For example, the amounts reported on a balance sheet dated December 31, 2010 reflect that instant when all the transactions through December 31 have been recorded. Because the balance sheet informs the reader of an organization's financial position as of one moment in time, it allows someone—like a creditor—to see what an organization owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not an organization qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, the organization’s management, suppliers, some customers, competitors, grant-markers and public agencies. We will begin our explanation of the accounting balance sheet with its major components, elements, or major categories: Assets and Liabilities.
Assets are things that the organization owns. They are the resources of the organization that have been acquired through transactions, and have future economic value that can be measured and expressed in dollars. Assets also include costs paid in advance that have not yet expired, such as prepaid advertising, prepaid insurance, prepaid legal fees, and prepaid rent.
Usually these asset accounts will have debit balances.
Accountants usually prepare classified balance sheets. "Classified" means that the balance sheet accounts are presented in distinct groupings, categories, or classifications. The asset classifications and their order of appearance on the balance sheet are: Current Assets, Investments, Property, Plant, and Equipment, Intangible Assets and Other Assets.
Liabilities are obligations of the organization; they are amounts owed to creditors for a past transaction and they usually have the word "payable" in their account title. Along with owner's equity, liabilities can be thought of as a source of the organization's assets. They can also be thought of as a claim against an organization's assets.
Business Planning for Organization Sustainability Page 13
For example, an organization's balance sheet reports assets of $100,000 and Accounts Payable of $40,000 and owner's equity of $60,000. The source of the organization’s assets is creditors/suppliers for $40,000 and the owners for $60,000. The creditors/suppliers have a claim against the organization’s assets and the owner can claim what remains after the Accounts Payable has been paid.
Liabilities also include amounts received in advance for future services. Since the amount received (recorded as the asset Cash) has not yet been earned, the organization defers the reporting of revenues and instead reports a liability such as Unearned Revenues or Customer Deposits.
Examples of liability accounts reported on a company's balance sheet include: Notes Payable, Accounts Payable, Salaries Payable, Wages Payable, Interest Payable, Other Accrued Expenses Payable, Income Taxes Payable, Customer Deposits, Warranty Liability, Unearned Revenues.
These liability accounts will normally have credit balances. Liability and contra liability accounts are usually classified (put into distinct groupings, categories, or classifications) on the balance sheet. The liability classifications and their order of appearance on the balance sheet are: Current Liabilities, Long Term Liabilities, etc.
Current vs. Long-term Liabilities
If an organization has a loan payable that requires it to make monthly payments for several years, only the principal due in the next twelve months should be reported on the balance sheet as a current liability. The remaining principal amount should be reported as a long-term liability. The interest on the loan that pertains to the future is not recorded on the balance sheet; only unpaid interest up to the date of the balance sheet is reported as a liability.
Notes to the Financial Statements
As the above discussion indicates, the notes to the financial statements can reveal important information that should not be overlooked when reading an organization’s balance sheet.
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Statement of Cash Flows
Cash flow is the single most important numerical analysis in a plan, and should never be missing.
The Statement of Cash Flow is one of the main financial statements (along with the income statement and balance sheet). The statement of cash flows reports the sources and uses of cash by operating activities, investing activities, financing activities, and certain supplemental information for the period specified in the heading of the statement.
Because the income statement is prepared under the accrual basis of accounting, the revenues reported may not have been collected. Similarly, the expenses reported on the income statement might not have been paid. You could review the balance sheet changes to determine the facts, but the cash flow statement already has integrated all that information. As a result, savvy business people and investors utilize this important financial statement.
The official name for the cash flow statement is the statement of cash flows. The cash flow statement reports the cash generated and used during the time interval specified in its heading. The period of time that the statement covers is chosen by the company. For example, the heading may state "For the Three Months Ended December 31, 2010" or "The Fiscal Year Ended September 30, 2010".
Cash Flow Projection Statement: Sample
Cash 1/1/04 1st
Qtr. 2nd
Qtr. 3rd
Qtr. 4th
Qtr.
Revenue
Special Event $25,000
Individual Donations $12,500 $12,500 $12,500 $12,500
Corporate Donations $12,500 $12,500 $12,500 $12,500
Foundation Grant $5,000 $25,000
Total $50,000 $25,000 $30,000 $50,000
Expenses
labor $25,000 $25,000 $25,000 $25,000
other $25,000 $12,500 $40,000 $5,000
Total $50,000 $37,5000 $65,000 $30,000
Net - ($12,500) (35,000) $20,000
Cash on hand $50,000 $50,000 $37,500 $2,500 $22,500
The cash from operating activities is compared to the organization's net income. If the cash from operating activities is consistently greater than the net income, the organization's net income or earnings are said to be of a "high quality". If the cash from operating activities is less than net income, a red flag is raised as to why the reported net income is not turning into cash. Some investors believe that "cash is king". The cash flow statement identifies the cash that is flowing in and out of the organization. If a nonprofit is consistently generating more cash than it is using, the nonprofit will be able to increase its operating budget, contribute to its reserve fund or invest in an endowment.
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Income Statement or Profit and Loss Statement
Sample Products Co. Income Statement
For the Five Months Ended May 31, 2010
Revenues & Gains
Sales Revenues $100,000
Interest Revenues 5,000
Gain on Sale of Assets 3,000
Total Revenue & Gains 108,000
Expenses & Losses
Cost of Goods Sold 75,000
Commissions Expense 5,000
Office Supplies Expense 3,500
Office Equipment Expense 2,500
Advertising Expense 2,000
Interest Expense 500
Loss from Lawsuit 1,500
Total Expenses & Losses 90,000
Net Income $ 18,000
The Income Statement is one of the main financial statements (along with the balance sheet and the statement of cash flows). The income statement is also referred to as the profit and loss statement, P&L, statement of income, and the statement of operations. The income statement reports the revenues, gains, expenses, losses, net income and other totals for the period of time shown in the heading of the statement. The income statement is important because it shows the profitability of a nonprofit during the time interval specified in its heading. The period of time that the statement covers is chosen by the business and will vary.
Business Planning for Organization Sustainability Page 16
For example, the heading may state: "For the Three Months Ended December 31, 2010" (The period of October 1 through December 31, 2010.)
"The Four Weeks Ended December 27, 2010" (The period of November 29 through December 27, 2010.) "The Fiscal Year Ended September 30, 2010" (The period of October 1, 2009 through September 30, 2010.)
Keep in mind that the income statement shows revenues, expenses, gains, and losses; it does not show cash receipts (money you receive) nor cash disbursements (money you pay out). People pay attention to the profitability of a nonprofit for many reasons. For example, if an organization was not able to operate profitably—the bottom line of the income statement indicates a net loss—a banker/lender/creditor/grant-maker may be hesitant to extend additional credit to the nonprofit. On the other hand, a nonprofit that has operated profitably—the bottom line of the income statement indicates a net income—demonstrated its ability to use grants or borrowed and invested funds in a successful manner. A nonprofit's ability to operate profitably is important to grant-makers, current lenders and investors, potential lenders and investors, the organization’s management, competitors, public agencies, and others. The format of the income statement or the profit and loss statement will vary according to the complexity of the business activities. However, most organization’s will have the following elements in their income statements:
A. Revenues and Gains Revenues from primary activities Revenues or income from secondary activities Gains (e.g., gain on the sale of long-term assets, gain on lawsuits) B. Expenses and Losses Expenses involved in primary activities Expenses from secondary activities Losses (e.g., loss on the sale of long-term assets, loss on lawsuits) If the net amount of revenues and gains minus expenses and losses is positive, the bottom line of the profit and loss statement is labeled as net income. If the net amount (or bottom line) is negative, there is a net loss.
Business Planning for Organization Sustainability Page 17
Is your organization ready to develop a business plan?
Assessment Questions Yes=5 No=0
1 Is the organization guided by a strategic plan?
2 Has the organization developed or conceptualized services and or products?
3 Has the organization identified its market niche?
4 Is the organization seeking grants, contributions, contracts and or developing market-based revenue lines?
5 Has the organization identified staffing needs or levels related to services and products?
6 Has the organization identified or developed marketing materials related to services and or products?
7 Do the financial records of the organization guide decision making?
8 Has the organization identified its primary customers?
9 Is the organization recognized and certified as a business (public, private or nonprofit)?
10 Does the organization have a financial advisor?
Total
How Did You Score? 50-35 Points
Develop the organization’s business plan and review annually 35-20 Points
Discuss missing elements with the decision-making authority, advisors and strategic partners 20-0 Points
Focus on Strategic Planning
Business Planning for Organization Sustainability Page 18
